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Here’s What Still Needs to Happen Before TPP Takes Effect

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TPP

The Trans-Pacific Partnership (TPP) deal may be technically “done” but there’s a lot left to do before the 12-nation trade agreement actually takes effect.

On Monday, the United States and the 11 Pacific Rim nations that are part of TPP said they reached an agreement on the historic trade package that some say will be a boon for American manufacturers and others argue will instead send jobs abroad and hurt U.S. trade.

In short, here’s what will happen next: Negotiators will spend the next 2-4 weeks finalizing the text, then President Obama will send the finalized text to Congress and the U.S. International Trade Commission (USITC) and notify them of his intent to sign it 90 days before he actually signs it. That notification also starts the clock ticking for the release of the final text to the public, which must be made available for at least 60 days before the president can sign it.

Now, there’s a host of other steps that have to happen from here to signing, like a USITC report, Ways and Means Committee consideration and Senate Finance Committee consideration, but barring any major problems, Obama could sign the TPP agreement by January or February of next year.

The agreement’s details may not yet be public, but some reports say TPP could include a yarn forward rule, meaning textile and apparel products would have to be made using U.S. or other TPP country yarns to qualify for benefits; some products will have more flexible “cut and sew” rules of origin; and U.S. imports of cotton woven shirts from TPP countries could have duty-free access to the U.S. market.

Sourcing Journal caught up with three experts—Nicole Bivens Collinson, president of international trade and government relations for the Sandler, Travis and Rosenberg trade law firm, Julie Hughes, president of the United States Fashion Industry Association (USFIA) and Matt Priest, President of the Footwear Distributors and Retailers of America (FDRA)—to discuss TPP’s present status and what we can expect in the months ahead.

SJ: Once finalized, what are the major things TPP will change for the apparel and footwear industries?

JH: With full implementation of the TPP, American brands and retailers will benefit from a free trade agreement with Asian countries that are both suppliers of apparel as well as consumers of apparel. Consumers will benefit from greater access to more types of fashion products, as well as better pricing, thanks to the removal of duties on apparel and on footwear.

American brands and retailers will benefit from greater access to consumers in the other TPP countries—ranging from high-income countries like Japan to growing consumer markets like Vietnam and Malaysia. The elimination of barriers to retailing and other service operations will expand opportunities for iconic American brands and retailers, leading to more jobs and growth opportunities in the United States.

American brands and retailers will benefit from improved flexibility and removal of duties from apparel made in Vietnam, Malaysia, Japan and the other TPP countries. While many of the current U.S. Free Trade Agreements are under-utilized, the TPP will offer excellent opportunities to expand sourcing and improve supply chains with some of the major apparel manufacturers.

MP: Duty reduction and elimination, duty reduction and elimination, and duty reduction and elimination. With almost $2.7 billion in duties paid on footwear last year and almost $450 million on TPP footwear imports alone, the potential for this agreement for our industry lies in the savings generated by the reduction and elimination of duties. Particularly at a time when Vietnam continues to surge in regards to its exports of footwear to the U.S. and its continued gains in U.S. footwear market penetration. But there is still much work to be done and we will, once again, lead the charge on behalf of our industry to bring this to a successful completion.

NBC: We will see a shift from China to Vietnam and Malaysia and we will see more fabric and yarn making go to these countries.

SJ: What type of opposition is TPP likely to face in the coming months?

JH: While the initial response from Congress has not been too positive, there is no doubt that the Administration is working closely with the trade committees to gain their support. The major problem may be that the TPP agreement will be signed in 2016—an election year. So far, the major presidential candidates have not been positive about TPP or trade agreements in general. This may also have an impact on Congressional races and Senate races.

Some of the impact will be because the organizations that are opposed to TPP are already fighting against the agreement. On the other hand, most business groups, including USFIA, are careful to say that we need to see the final text until we can come out with a full assessment of the impact on our industry. If the majority of companies and associations come out in support of the agreement, that will have a positive impact on the Members of Congress—who of course want to hear from their constituents.

MP: It is very early in the process to know the full depth and breadth of both the support for and opposition to TPP on Capitol Hill, particularly when the full text of the agreement has not been made public. It is safe to assume, that those who did not support TPA in July and labor union groups will not support this agreement. Beyond those obvious groups, we will have to wait and see.

NBC: Opposition is still forming. Some groups have already come out against it as well as some key members of Congress.

So what does Congress think about TPP?

In their initial reactions to the announcement that TPP was agreed on, key White House leaders and members of Congress had this to say:

Sen. Orrin Hatch (R-Utah) said, “Closing a deal is an achievement for our nation only if it works for the American people and can pass Congress by meeting the high-standard objectives laid out in bipartisan Trade Promotion Authority. While the details are still emerging, unfortunately I am afraid this deal appears to fall woefully short.”

Sen. John McCain (R-Ariz.) said, “The TPP offers a historic opportunity to reduce trade barriers, open new markets, promote made-in-America exports, and keep American companies competitive in one of the most economically vibrant and fastest-growing regions in the world. By ending more than 18,000 import tariffs and removing additional trade barriers, the TPP will strengthen the American workforce and make our economy more competitive and prosperous.”

Rep. Sander Levin (D-Mich.) said, “We have to get this agreement right, which is why no one should be surprised if the 90-day period results in additional changes, particularly since many of these issues are the subjects of bi-lateral negotiations. The most important objective is to get the strongest agreement that benefits American workers and the U.S. economy for generations. The role of Congress now is as important as ever.”

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